ROUND ALL YOUR ANSWERS TO ONE DECIMAL PLACE. Suppose the market for pizza is per

Question

ROUND ALL YOUR ANSWERS TO ONE DECIMAL PLACE.

Suppose the market for pizza is perfectly competitive. Furthermore, suppose the total cost curve for a typical pizzeria is TC = 2 + 8q2 where q represents the quantity of pizzas sold by a single pizzeria each day. Suppose that there are 20 pizzerias in this market, sharing a market demand given by P = 100 – 4Q, where P represents price pizza and Q represents the total number of pizzas sold in the entire market.  

a) The supply curve for this market will be equal to:

S =

b) In the short-run, what is the quantity of output and the market price in the market?

Q = ; P =

c) In the long-run, what is the quantity of output market price in the market?

Q = ; P =

d) How many firms will operate in this market in the long-run?

Q =   

Explanation / Answer

Ans)

a)

Supply curve is equal to MC curve

So

dTC/dq = 16q

so supply function is

P=16Q.

b)

The equilibrium is Demand function = Supply function or MR=MC

So

For individual

100-4q=16q

So that q=5 & p=80=P

And Q=5X20=100

C)

In long run supply cuvre is equal to AVC

So supply curve

P= 8q

D)

The quantity and price in Long run

100-4q =8q

So that q = 8.33 & p=64.26

Q=8.33 X 20

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